hello all,
I am long time active reader of this site… first of all i want to thank all of you keep the good discussion going…
I would like some help from you …
I currently own own a unit which is my PPR of resident…
Back in feb this year i used available redraw on my PPR (reduced the amt owing on the PPR) to borrow 100% for an investment property.
Investment property is currently under construction with the completion in Oct-Nov…
Now i have changed my mind and would like to move in the new house myself once it is constructed and rent my current property out.
Both loans are with the same bank
So i would like help with following questions:
1. how can i structure my loan bal so i owe most on the IP…. is it possible i can move the amt paid on my current PPR to the new property (the amt -40K i reduced the loan amt back in feb)… so i can owe maximum on the unit (current PPR) when i rent it out… and owe less of the new property..
2. Also i have 10k available in the redraw of the current property, i would like to move the funds as a redraw to the new loan… once the current unit is rented out, am i able to claim tax deduction on the interest paid on the 10k..
3. how i can change the PPR from the existing to the new property..can someone please help me out with this… and any other suggestion you like to make…
p.s I don't want to sell current property at this moment…
Regards
Hi Rabbit
Good to have you with us.
Ok my friend i think you have caused yourself a problem.
1. how can i structure my loan bal so i owe most on the IP…. is it possible i can move the amt paid on my current PPR to the new property (the amt -40K i reduced the loan amt back in feb)… so i can owe maximum on the unit (current PPR) when i rent it out… and owe less of the new property.. Bit to late to do this now however depending on the numbers you would look to transfer the property into a Unit Trust structure with you as the sole Trustee. Stamp Duty would be payable but might be worth doing the exercise on paper.
2. Also i have 10k available in the redraw of the current property, i would like to move the funds as a redraw to the new loan… once the current unit is rented out, am i able to claim tax deduction on the interest paid on the 10k.. Unofrtunately does work like that. The funds from the redraw will not be Tax deductible as the purpose of the money is to fund your future PPOR.
3. how i can change the PPR from the existing to the new property.. Think i have covered that one.My suggestion is to run your figures through a Mortgage Broker who has some knowledge of investment. Couple of things potential you could do but again had the properties not be cross collateralised would have been a lot easier.
Richard Taylor | Australia's leading private lender
thanks richard..
is it possible that as the new property is under construction i move additional funds (10K) from my redraw into the construction loan prior to the completion of the property… so by the time i rent the unit out it will have that amount owing on it.. and i can claim the interest on it..
i understand the unit will be massively positive geared when i let it out… but moving into the house as a PPR will be more advantageous for me as there will be massive capital gain on it compare to the single bed room unit in future…
other thing should i get the unit valuated prior to me moving out of it.. so in future when i sell it .. i only pay the capital gain on the difference on what it is worth now and sell price in future…
please advise…. any other would like to suggest a better option for me that would be nice..
regards
Hi Rabbit
Moving funds out of the redraw will not mean the interest will become tax deductible unfortunately.
As soon as the unit is available for rent you should get it valued and this will become the cost base figure.
Richard Taylor | Australia's leading private lender
Every withdrawal from a loan is considered new borrowings – so the deductibility of the interest will depend on what the funds borrowed are used for. If you borrow to fund your new property which you will live in, then the interest will not be deductible.
You need to think outside the square. What can you borrow money for that will be deductible? eg rates for the investment property, strata, insurance etc. This will gradually free up money to be used for reducing the PPOR loan – actually you should never, or rarely, reduce a loan. All loans should be IO with the owner occupied loan having a 100% offset attached. Never need to use a redraw.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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